Audio 2:47
Russia hikes gas prices in act of 'economic aggression'

Mary GearinUpdated
Mon Apr 07 09:12:00 EST 2014

Ukraine has threatened legal action after Russia hiked its gas prices by almost double in one week. Ukraine's prime minister called the move an 'act of economic aggression', with tensions still high after Russia's annexation of Crimea. The gas hike is sure to increase pressure on Kiev and its European allies, as Europe Correspondent Mary Gearin reports.

Transcript

CHRIS ULHMANN: Ukraine has threatened legal action after Russia hiked its gas prices by almost double in one week. Ukraine's prime minister called the move an act of 'economic aggression', with tensions still high after Russia's annexation of Crimea.

The gas hike is sure to increase pressure on Kiev and its European allies, as Europe correspondent Mary Gearin reports.

MARY GEARIN: The anger has not stopped in the east of Ukraine. Hundreds of demonstrators stormed the regional government headquarters in Donestsk - a reminder that for many Ukrainians, Crimea's annexation doesn't mean the rest of the country has settled for the rule of Kiev's government.

At the same time, the Kremlin was hitting where it will hurt, hiking the price of gas to Ukraine by more than 80 per cent, to about $525 per thousand cubic metres, up from $290.

This weekend, Ukraine's prime minister Arseniy Yatsenyuk said his country would pursue legal action.

ARSENIY YATSENYUK (translation): That is the highest price in all of Europe. It is not an economic but a political price. Russia didn't manage to invade Ukraine by military aggression. Now they are fulfilling their plan to pressurise and invade Ukraine by gas and economic aggression.

MARY GEARIN: Gazprom says Ukraine's gas debt to Russia stands at more than $1.8 billion. Ukraine relies on Gazprom for half its gas.

Ilya Zaslavskiy, research fellow from the UK think tank Chatham House says the price is designed to provoke instability.

ILYA ZASLAVSKIY: It's deliberately asking the price which is very difficult for Ukraine to pay, and this is not justified by market conditions.

MARY GEARIN: What do you think specifically the gas price hike is designed to do, from Vladimir Putin's point of view?

ILYA ZASLAVSKIY: He wants to undermine currency accounts of the new government; he really wants to strangle them financially.

MARY GEARIN: About 15 per cent of Europe's gas supply goes through Ukraine. It's vowed to not siphon off the gas for itself, but Ilya Zaslaviskiy says that could change.

ILYA ZASLAVSKIY: The current Ukrainian government is trying to be diplomatic and that's a good way. But what exactly happens when they face physical necessity to heat hospitals and schools and basic infrastructure.

I'm sure they might be facing a situation where they have to siphon gas off, and European politicians should understand that because they were themselves in the same position in 2009.

MARY GEARIN: German Chancellor Angela Merkel has said no one should doubt Europe's willingness to introduce tougher sanctions against Russia should the country move further to destabilise Ukraine.

A day later, Gazprom told a German newspaper it will honour its commitments to Berlin, lending more weight to the theory that the Kremlin is on course to divide Europe, as well as Ukraine.